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2023-08-15

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The hospitality industry is a significant consumer of energy and water, as well as a generator of substantial wastes. Despite numerous sustainable development initiatives, they still face challenges in reducing greenhouse gas emissions and making improvements in the ESG (Environmental, Social, and Governance) domain.

 

The Role of Sustainable Practices in the Entire Hotel Lifecycle

 

Life Cycle Assessment (LCA) is defined as a systematic analysis of the potential environmental impacts of products or services during their entire lifecycle. In the hospitality industry, three phases of the lifecycle can be distinguished : development, operations, and disposal. These also includes upstream processes (i.e suppliers) – and downstream processes (i.e waste management).

In the development phase of hotel lifecycle, the earlier sustainable development aspects are considered, the better, starting from the design of the building (sustainable buildings, passive structures), its construction (use of sustainably produced materials, "green hotel" construction) to financing (increased interest in ESG-oriented investments).

The majority of a hotel's lifecycle occurs during the operational phase, both in terms of duration and resource utilization. It is therefore crucial for hotel operators (and owners) to be aware of whether their actions align with best sustainable development practices.

Within their daily operations, entities in this sector focus on implementing measurement and management systems, sustainable sourcing, local purchasing, and circular economy initiatives. Modernization investments provide opportunities for emission reduction (presence sensors, room thermostats, photovoltaic installations).

In the LCA disposal phase, sustainable assets will generate higher cash flows for investors/owners during their ownership period and create greater value upon exiting the business. This can be achieved through:

  • Increased revenue: International research indicates that 53% of hotel guests are willing to pay more for environmentally friendly products.
  • Increased margins: Higher alignment with sustainable development standards means greater building efficiency and lower operational costs – or from a social perspective, satisfied employees who are easier to retain, leading to lower recruitment and training costs.

 

Sustainable assets generate more investor interest, resulting in a larger pool of potential buyers and contributing to a "green premium" for sellers. Conversely, assets not meeting sustainable development requirements will become less attractive to new investors. Owners of such assets will face increasing pressure to offer additional discounts for the sale of assets that do not meet these requirements.

 

Examples of ESG Activities in the Hotel Industry

 

To meet the goals outlined in the Paris Agreement, the hospitality industry must reduce its annual carbon dioxide emissions per room by 66% by 2030 and by 90% by 2050. Leading hotel chains have committed to decarbonization strategies in accordance with the Science Based Targets Initiative methodology.

 

Hilton, one of the largest hotel chains, is taking the following actions related to emission reduction: 

  • Measuring and reducing carbon footprint – the network has committed to reducing emission intensity by 61% (Scope 1 and 2) by 2030;
  • Improving energy efficiency,
  • Increasing renewable energy consumption,
  • Waste reduction and recycling,
  • Water conservation,
  • Sustainable design and construction,
  • Carbon offsetting,
  • Implementing new innovative technologies,
  • Training and building employee engagement.

Employee development, franchisee base, supplier network, ensuring equality and integration of all stakeholders have become priorities for many hotel companies. Social matters also encompass issues related to the well-being of guests and employees, labor practices, volunteering, as well as training programs.

Many operators choose suppliers based on ESG alignment. One of Hilton's integration goals is to double spending on local, small, and medium-sized businesses. Companies aim to make hotels an integral part of larger communities by increasing involvement in charitable actions and volunteering.

Corporate governance matters include diversity of supervisory boards, corporate ethics, transparent reporting on environmental and societal goals, and clear guidelines for executive compensation.

 

Surveys among customers clearly indicate a growing awareness of the importance of sustainable development.

  • Over 50% of surveyed travelers state that environmental and sustainable development factors are the basis for their travel plans (Google Insights).
  • 71% of guests planned to travel "more eco-friendly," with over half indicating a commitment to making more environmentally conscious travel choices within the next year (Booking.com).

 

Summary

The hospitality industry is taking increasingly more  sustainability actions. These often relate to energy efficiency, water management, waste management, sustainable construction, and education.

The greatest challenges and areas for improvement concern: (1) collaboration with suppliers (implementing sustainable practices in the supply chain); (2) sustainable investments (requiring significant capital expenditure); (3) transparent and credible reporting – to assess the effectiveness and progress of actions contributing to sustainable development.

Growing environmental awareness among customers, pressure for environmental protection, including new regulations, will impact the increasing significance of ESG activities in the hotel industry

 

 

 

 

 

 

 

If you don’t understand what’s happening in your business factually and you’re making business decisions based on anecdotal data or gut instinct alone, you’ll eventually pay a big price.

Bill Gates, Microsoft co-founder

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